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Vol. 16, No. 23 Week of June 05, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Shell eyes Canadian LNG; to spend US$10B on world’s biggest carrier

Royal Dutch Shell is carefully strengthening the impression that it will be the third company to announce plans for an LNG export facility in British Columbia.

More than two months after Lorraine Mitchelmore, the head of Shell’s Canadian division, disclosed that options for a terminal at Prince Rupert were being explored, a company spokesman told the Vancouver Sun that work is now “early in the evaluation process” and opportunities are being pursued.

Although the spokesman stopped sort of disclosing details, he said Shell “will continue to invest in our global (LNG) leadership position as demands continues to grow.”

Petroleum Intelligence Weekly reported on the heels of the Japanese earthquake and tsunami that the destruction of two Japanese nuclear reactors could prompt Shell and its Asian partners, notably Mitsubishi or Korea Gas, to develop a Prince Rupert plant capable of shipping 8.5 million to 14 million metric tons a year of gas.

Export of 1.8 bcf per day

Mitchelmore said rapid changes in the global LNG market had prompted Shell to contemplate an export facility capable of liquefying 1.8 billion cubic feet per day of Western Canadian gas.

The Kitimat LNG project, with Apache as operator and EOG Resources and Encana as partners, is already in the regulatory phase of an application to handle up to 1.4 billion cubic feet per day and ship 10 million metric tons a year of LNG. The National Energy Board starts formal hearings on June 7, with the first LNG exports targeted for 2015.

Plans have also been submitted by U.S.-led BC LNG Export Cooperative to convert 125 million cubic feet per day into 900,000 metric tons a year of LNG, starting in 2013.

Bill Gwozd, of Ziff Energy, estimated that, at its upper projection, a Shell project would cost C$5 billion-C$7 billion.

Enticing price spread

The attraction of an already enticing spread between the price of LNG in Asia and what the same gas would sell for in North America is building as Japan turns to LNG to offset the loss of nuclear power.

State-owned Japan Oil, Gas and Metals National Corp. estimated in April that Japan may need an extra 7 million to 10 million metric tons a year of LNG in the long-term.

With its eye on Asian markets, Shell has announced one of the boldest moves yet, with plans to spend more than US$10 billion on the world’s biggest ship — an LNG carrier capable of delivering 3.6 million metric tons a year of LNG from Australia to Asian buyers, starting in 2017.

The company said the “floating technology” will be complementary to onshore LNG terminals, but will accelerate the development of gas resources by tapping fields in more remote locations.

—Gary Park



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